Why Can’t ‘Winning’ Active Managers Keep on Winning?

Why Can’t ‘Winning’ Active Managers Keep on Winning?

If you’ve read any of my previous articles, you know I’m not a fan of active management. The numbers show that it simply doesn’t work. There are several arguments against active management, but one of the most damning is that winners don’t seem to repeat. Past performance doesn’t indicate future performance – it’s not just something the killjoy lawyers make everyone say. What someone did in the past doesn’t tell you what they will do going forward (outside of some specific situations). Individual active managers could potentially beat the market consistently (though it’s tough to identify which ones will beforehand). But this lack of persistent outperformance is the most persuasive argument that active managers do not have a widespread ability to beat the market. If people could beat the market – even if they were just more likely to beat the market than others – this would show up in the persistence data. If someone has actual skill, it doesn’t just go away after a couple of good years, right? But that’s not what the numbers show. It turns out it’s largely random which funds win and which funds don’t. Let’s look at the data. Last year, Dimensional Fund Advisors […]

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Source: Retirement Researchers

Why Can’t ‘Winning’ Active Managers Keep on Winning?

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